RBA Day

Aussie 10s outperformed their U.S. counterpart during the overnight leg of cheapening, with YM & XM trading -2.0 & -2.5 respectively at typing. As a reminder, guarded optimism re: omicron was in the driving seat on Monday.

• In local news flow, the latest IMF report on Australia pointed to the well-documented weathering of the economic storm provided by COVID.
• The latest RBA decision headlines the domestic docket on Tuesday. The RBA’s December meeting and subsequent statement should be a relatively bland affair, coming in the wake of the November gathering, which resulted in the widely expected formal removal of the Bank’s YCT mechanism and adjustments to the Bank’s forward guidance. The latter evolved into a deliberately ambiguous passage, with patience and the ability to deliver sustainable underlying inflation at its core. This should remain unchanged this time out, as should the broader levers of monetary policy. The RBA will likely tilt its hat to the short-term risks/uncertainty provided by the omicron COVID variant, which will add a sense of vindication to its pursuit of optionality and relatively dovish utterances when we compare market views to the RBA’s forward guidance. Please see our full preview for more colour on the decision. Q3 house price data will also cross.